Q.Seenu and Siva are partners sharing profits and losses in the ratio of 5 : 3. In view of Subbu's admission, they decided :

On admission, assets and liabilities are revalued to their current worth so that any profit or loss on this revaluation — and any accumulated reserve or undistributed profit/loss already sitting in the old balance sheet — belongs entirely to the OLD partners, in their OLD profit-sharing ratio, since it arose before the new partner joined. A Revaluation Account is opened: it is debited with any decrease in an asset, increase in a liability, or a newly-recorded unrecorded liability; it is credited with any increase in an asset, decrease in a liability, or a newly-recorded unrecorded asset. The resulting profit or loss is transferred to the old partners' capital accounts in the old ratio. Reserves and accumulated profits (General Reserve, Reserve …